Bootstrapping

Bootstrapping

The term “Bootstrapping” given by Efron(1979) hearkens back the idea of someone ‘pulling themselves by their bootstraps’. The term refers back to 19^th century high-top boots that are pulled on by tugging at ankle straps----------generally means doing something without outside help.

Bootstrapping is a buzzword specially used with the concept of Entrepreneurship in its purest form. It is the transformation of human capital into financial capital. The entrepreneurship academic research still not fully recognizes the effect of bootstrapping on entrepreneurial behavior and organizational success through formal research. There are four kinds of Bootstrapping options—

Ø  Bootstrapping Product Development

Ø  Bootstrapping Business Development

Ø  Bootstrapping to minimize the need for (outside) capital financing.

Ø  Bootstrapping to minimize the need for capital.

It is the penultimate stage when other there is no alternatives left.

Bootstrapping allows us to keep control of our equity, while venture capital is designed for investors to gradually take control of more and more of our company’s equity. Bootstrapping is also appropriate for business that doesn’t necessarily have to be going after large market opportunities. For Instance, Frank Levinson, Jerry Rawls Sridhar Vembu (who is taking on Google, Microsoft and Salesforce.com with no venture capital). So, we can say bootstrapped entrepreneurship acts as a true weapon of mass reconstruction. 

As a Internet marketing Medium Bootstrapping plays an important role specially when social media becomes more important. With the continued pressure of a down economy, marketing executives are not only expanding marketing but also to ensure business growth from those budgets. . The marketing channels are usually distinct entities; data related to each channel is also distinct, and often not integrated. While fully integrated marketing channels that track customers across channels from "first touch" to sale may be the Holy Grail of marketing analytics, the reality is that many organizations do not have systems in place that can serve up data this way. Since common customer identifiers are not available across disparate marketing channels, analytics at this level of detail is not realistic.  Spend justification relies on illustrating relationships between marketing spend and revenue. This relationship need not be defined at the customer level, but instead could be defined across some common time interval such as days, weeks, months, quarters or even years.  Naturally, the more granular the time period, business variability related to marketing spends will be better understood. The example below illustrates this relationship for an online retailer that wished to justify increased sales through an expanded marketing program budget.  This retailer used a multi-channel marketing program that includes Facebook, Google Ad Words and Search Engine Optimization (SEO) to promote their products.  The chart below shows daily spends on Facebook to ad clicks that lead to website visits.  The strong relationship between these two factors indicates that Facebook spend is leading to website visits (naturally with a pay-per-click campaign). 

There are only two basic methods employed by nascent entrepreneurs:

1) Gaining control of resources

2) Efficiently utilizing resources (e.g., minimizing expenses). Taken together, these two methods form the basis for an overall strategy. A bootstrapping entrepreneur’s very survival may well depend on his or her ability to be highly adaptable and operate on a shoestring budget

A Short-List of Practical Suggestions for Bootstrapping Business Start-Ups

1) Start-up entrepreneurs with little capital should be advised to strongly consider a business model that entails compensation prior to the delivery of a product or service (e.g., consulting, mail order, or niche oriented Internet businesses that do not require a glitzy Web site).

2) An emphasis on pre-launch preparations, perhaps several years in advance may be wise.

3) More education and training are needed for would-be entrepreneurs such that they are more familiar with traditional sources of capital and non-traditional sources. Bootstrapping should be a course unto itself in university level entrepreneurship programs.

4) Stockpile non-perishable business assets over a long period of time. Businesses that have resulted from a hobby often start out with many of the necessary tools, contacts, sources, and skills on the part of the owner to be well equipped from their inception.

5) Conduct enormous amounts of research: library research, bookstore research, Internet research, and especially field research (the non-scholarly translation of field research: network, network, network, with prospective suppliers, customers, advisory board members, and other potential friends of the business).

6) Consider an agency or brokerage-type business: connect a party who needs to sell, with a party who needs to buy.

7) Get quotes. Provide a vendor with a general idea of a needed end result for a manufactured product (or a service) and ask for design specifications, pricing, projected delivery schedules and terms (be sincere as a prospective customer).

8) Negotiate terms carefully. Negotiate terms for purchases from vendors and sales to customers. When possible, arrange the purchase-sales sequence in a way, that customers finance the purchase of inventory through prepayment terms.

9) Choose a location wisely. Consider the “image” needs of the business, but also seek economic development dollars (or stakeholders) and co-location opportunities in neighbors with synergistic potential. Do not choose a location because it is close to home and convenient for the owner. It must be convenient for the customer, for the logistical needs of the business, and in a nurturing environment.

10) Advertise a product that could be produced, if response to the ad justifies its production.

11) Develop business communications and media skills. Be worthy of media attention (i.e., be newsworthy) due to a unique product, company history, team, or even aspiration.

12) Be generous. People are willing to follow a leader who understands their needs, and fulfills those needs.

13) Sell in volume at wholesale, rather than one unit at a time (Mamis, 1992).

Finally we can say that, there’s no course book of bootstrapping techniques, but there to be

The approach has much to teach--and even companies that have progressed beyond their    bootstrap days would do well to relearn some of the proven tactics”

References:

·         The Smart Manager(Mar-Apr—10): Sramana Mitra: Vision 2020

·         Bootstrapping Business start –Ups: A Review Of Current Business Practices

·         How to Bootstrap Marketing By Spence Fry

·         Bootstrapping a Marketing Program with Analytics by Anthony Chamberas

·         http://www.investopedia.com/terms/b/bootstrapping.asp#ixzz25Zl2isOk